COP29 + Trump 2.0 = An Eventful Q4
And a potential way forward for carbon credits
Welcome back to Clickable Insights – where our Clickable Impact team shares perspectives on green and inclusive development. Visit our Substack to read editions by the topics most important to you.
Today’s newsletter examines COP29, Donald Trump, and an eventful Q4’s implications for development finance. We also share some positive developments for the global voluntary carbon market.
COP29 ended on a rancorous note, which was perhaps inevitable given that it took place in a petro state and many leaders skipped it to attend APEC and G20.
On the agenda: commitments from the Global North to finance climate action in the Global South.
Developing countries wanted annual government-to-government grant commitments of at least US$1 trillion. Negotiators ultimately landed at US$300 billion.
Reuters quoted India’s representative as saying: "I regret to say that this document is nothing more than an optical illusion. This, in our opinion, will not address the enormity of the challenge we all face. Therefore, we oppose the adoption of this document."
There is no arguing that US$300 billion is a drop in the bucket. The OECD estimates that the world needs US$5 trillion in climate finance annually through 2030, with US$2.4 trillion needed for developing countries. The US$300 billion commitment doesn’t even account for inflation.
Delegates called on MDBs and the private sector to mobilize an additional US$1.3 trillion in “voluntary” finance. Bloomberg points out the history of tension between the UN system and these “voluntary” partners.
For developing countries, the key now is figuring out how to achieve a leverage ratio of at least four dollars in matching financing for every one dollar of grant financing. This is an institutional opportunity for the MDBs, foundations, and private investors – even as it is gravely disheartening for Global South.
For better or worse, COP29 will intensify calls to treat decarbonization as a complex market system. Climate change might be a tragedy of the commons, but the traditional solution to the commons – public finance – seems like a non-starter.
Trump 2.0
This all comes with a second Trump administration looming – now with complete control of the American government.
In Trump’s first term, he ended American funding for the Green Climate Fund and withdrew from the Paris Agreement. President Joe Biden rejoined Paris, but Trump is expected to pull the U.S. out again, leaving the world’s largest historical emitter of greenhouse gases uncommitted to future financial support.
Trump’s disdain for multilateralism and so-called ‘globalist’ institutions doesn’t bode well for the post-World War II Bretton Woods architecture either.
In an article for the Council on Foreign Relations, Karen Mathiasen, project director at the Center for Global Development and former acting U.S. executive director at the World Bank, argues that multilateral institutions are central to American foreign policy. Yet, multilateralism has always required flexibility and tradeoffs. She writes: “First, the United States must negotiate with other key shareholders, which entails compromise. Second, the United States routinely needs to back multilateral initiatives with new funding commitments that require congressional approval.”
Trump has no appetite for trade-offs and will lead a Republican-held congress bent to his will. The highly controversial Project 2025, which Trump reportedly supports, calls for the U.S. to withdraw from Bretton Woods institutions.
USAID, meanwhile, endured significant cuts during Trump’s first term, while he also wanted significant reductions for numerous UN humanitarian agencies. Experts in the aid sector are concerned about new cuts at a time when numerous international crises have stretched global aid thin.
Martin Mühleisen of the Atlantic Council’s GeoEconomics Center (and a former IMF official) offers some reason for optimism. He reminds us that the IMF and World Bank fared surprisingly well during Trump’s first term.
This, he writes, was because the administration “quickly realized that the two institutions provided the United States with financial leverage to pursue its global objectives, including by assisting friendly countries that would otherwise depend mostly on Chinese lenders for support.”
The rivalry between the U.S. and China is even more intense than during Trump’s first term, raising the specter of the incoming president pushing bodies like the IMF to explicitly support his policies on, for example, trade restrictions or efforts to strengthen the dollar.
Over the last several weeks, our Clickable Impact team has attended a number of panel debates where informed speakers have articulated a consensus on two points:
Trump is transactional and will likely accelerate the subversion of aid to geopolitics.
Trump is staking out negotiating positions. For example, his much-publicized tariff threats could be a negotiating ploy.
Perhaps Mühleisen is correct through that lens: The U.S. still needs the Bretton Woods institutions. However, Trump will likely renegotiate terms even if the U.S. stays in them.
In an age of uncertainty, one certainty is that no one can accurately predict what Trump will do once in office. Turbulent seas await.
Moving forward
In positive news, COP29 attendees agreed to new international carbon market standards to replace the problematic Clean Development Mechanism (CDM) credits market created by the Kyoto Protocol.
The CDM was intended to allow developed countries to reach their emissions reduction targets at a lower cost. Instead, it is deeply flawed and has largely failed to reduce emissions. Many CDM credits are no longer valid since they fail the additionality requirement.
In January 2023, The Guardian published an expose accusing Verra—the world’s premier certifier of carbon credits—of overstating the emissions reductions associated with its “avoided deforestation” credits. According to that report, just 6% of Verra’s claimed deforestation credits reduced emissions.
Here in Southeast Asia, a new global market for voluntary credits could be a huge benefit since the region is one of the world’s largest sources of voluntary carbon credits. It also boasts one of the most extensive stocks of Kyoto methodology credits that could be transitioned into the new framework.
Southeast Asia is well-placed to emerge as a hub for carbon services thanks to regulatory developments such as Malaysia’s planned carbon market and Singapore’s bilateral carbon trading agreements, along with its project development capacity. We think the region could lead in fostering climate investments and driving global carbon market advancements.
Special thanks to Clickable Impact consultants Ha Nguyen, Dieu Linh Phan, and Jason Lusk for contributing to this newsletter. Join us next month for more updates on climate action, transformative innovation, and sustainable tourism.
Clickable Insights is brought to you by Clickable Impact
Clickable Impact is an Asia-based consultancy committed to climate action and sustainable development. We have three practice areas: public affairs and communications, sustainable tourism, and transformative innovation. Across our work, Clickable Impact favors projects that urgently mobilize private sector engagement, policy action, and investment.
All views expressed in this newsletter are our own.
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Good newsletter! Happy holidays! Megan